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CIRCULAR No

CIRCULAR No. 91/1999/TT-BTC OF JULY 23, 1999 GUIDING THE IMPOSITION OF VALUE ADDED TAX ON GOODS PROCESSED FOR EXPORT

Pursuant to the provisions of the Law on Value Added Tax (VAT) and the Government�s Decree No.28/1998/ND-CP of May 11, 1998 detailing the implementation of the VAT Law;

Pursuant to the provisions of the Government�s Decree No.57/1998/ND-CP of July 31, 1998 detailing the implementation of the Commercial Law�s provisions on goods export, import, processing, and purchase and sale agency activities with foreign countries;

In order to materialize the export goods production and processing promotion policy; in furtherance of the Government�s Decree No.08/1999/ND-CP of July 9, 1999 on the measures to administer the tasks set for the last 6 months of 1999;

The Ministry of Finance hereby additionally guides its Circular No.89/1998/TT-BTC of June 27, 1998 guiding the implementation of the Government�s Decree No.28/1998/ND-CP of May 11, 1998 which details the implementation of the VAT Law, regarding the imposition of VAT on goods processed for export, as follows:

I. Goods processed for export eligible for the VAT rate of 0% include:

1. Goods which are directly processed and exported by establishments under contracts signed with foreign countries. In this case, the export processing establishments must have enough dossiers and vouchers proving that the goods have been actually exported according to the provisions at Point 1, Section II, Part B of the Ministry of Finance�s Circular No.89/1998/TT-BTC of June 27, 1998;

2. Intermediary processed goods for export as prescribed in Article 17 of Decree No.57/1998/ND-CP of July 31, 1998 of the Government detailing the implementation of the Commercial Law�s provisions on the goods export, import, processing, and purchase and sale agency activities with foreign countries:

This case shall apply to establishments directly processing goods for export under the processing contracts signed by such establishments with foreign parties. But the processed goods, instead of being exported abroad, are delivered to other domestic establishments designated by the foreign party(ies) for further processing into finished products under the signed processing contracts; and the remuneration shall be paid by the foreign party(ies) directly to the processing parties.

When delivering intermediary processed goods to other establishments designated by the foreign party(ies), the goods delivering establishments shall have to bill the VAT invoices, inscribing the 0% tax rate therein. In this case, the processed goods for export shall have to be enclosed with the following dossiers and vouchers, which shall serve as basis for VAT calculation and final settlement:

- Export processing contracts and appendices thereto (if any) signed with foreign countries and clearly stating the names and addresses of the establishments designated to receive processed products for further processing in Vietnam;

- VAT invoices, clearly stating the processing costs and the volume of processed goods to be returned to the foreign parties (according to the costs stated in contracts signed with such foreign parties), and the names of the establishments to receive such goods as designated by the foreign parties;

- The bills of delivery of intermediary processed goods (hereafter referred to as intermediary bills) with certifications of the intermediary processed goods deliverers, the intermediary processed goods receivers and the customs authorities managing the processing contracts of the intermediary processed goods deliverers and the customs authorities managing the processing contracts of the intermediary processed goods receivers.

The procedures for delivering and receiving intermediary processed goods and intermediary bills shall comply with the provisions of the General Customs Department�s Circular No.03/1998/TT-TCHQ of August 29, 1998 guiding the implementation of Chapter III of the Government�s Decree No.57/1998/ND-CP of July 31, 1998.

For example: Company A signs a contract for processing of 0.2 million pairs of export shoe soles with a foreign party. The processing cost is 800 million VNdong. The contract clearly states that shoe soles shall be delivered to Company B in Vietnam for making finished shoes.

In this case, Company A is an intermediary export goods processor. When billing invoices and vouchers for delivering shoe soles to Company B, Company A shall inscribe the tax rate of 0%, and the whole shoe sole processing turnover of 800 million VNdong shall be subject to the VAT rate of 0%.

3. Regarding goods processed for export under entrusting contracts:

The establishments directly processing export goods for foreign parties under the contracts signed with such foreign parties or entrusting contracts signed with foreign parties by other units on their behalf in form where the entrusted parties shall carry out the procedures for returning the export processed goods and are entitled only to a commission on the processing remuneration.

When delivering the processed goods to units undertaking the entrusted export, the processing units that entrust the export shall bill VAT invoices, inscribing the 0% tax rate therein.

In this case, the entrusted processing establishment must fully have the following dossiers and vouchers which shall serve as basis for VAT calculation and final settlement:

- The goods processing contract signed with foreign party(ies) by the unit that has directly signed the processing contract with foreign country(ies) (copy);

- The entrusted processing and export contract or the contract for entrusted export of processed goods (for cases where the processing establishment directly signs the export goods processing contract with the foreign party, but returns the processed goods through an entrusted unit);

- The export goods declaration of the entrusted exporting party with the customs� certification of the volume of goods items actually exported (copy). In cases where the customs declaration is used commonly for export goods of many goods owners, the entrusted exporting party shall have to make and send copy of such customs declaration together with the processing unit�s certification of the detailed list of volumes and categories of goods processed for entrusted export. The entrusted party shall have to put its signature and seal on such list and the copy of the customs declaration, and take responsibility for data stated therein;

- The minutes on liquidation of the processing and export entrustment contract (in cases where the contract has been terminated) or the periodical debt comparison minutes which clearly states the volume of processed products for entrusted export already delivered, the actually exported volume, the payable and paid processing remuneration.

The copies of the above-said documents must obtain true-copy certification, signature of the director and seal of the enterprise that keeps the originals thereof.

For example: Company X signs an apparel processing contract with a foreign party to make 100,000 clothing suits for a remuneration of 200 million VNdong. Company X also signs a contract with Company Y for exporting processed goods to such foreign party with a commission equal to 5% of the remuneration.

In this case, Company X is a processor of goods for entrusted export. When billing invoices for delivering goods to Company Y, Company X is entitled to inscribe the tax rate of 0%, and the whole export goods processing turnover of 200 million VNdong it receives shall be subject to the tax rates of 0%.

II. This Circular takes effect after its signing. Export goods processing contracts, which were performed before the issuing date of this Circular, fall into cases specified in this Circular and meet all the dossier conditions prescribed for processed goods for export, shall be subject to VAT according to the provisions of this Circular.

Any problem arising in the course of implementation shall be reported by the concerned units to the Ministry of Finance for consideration and handling

For the Minister of Finance

Vice Minister
PHAM VAN TRONG